December 2, 1982

You represent a company ("Company") that produces and sells videotape recordings. Some of its customers are who engage the Company to make videotapes of social events, such as weddings and bar mitzvahs. Others are businesses that purchase videotapes from the Company for use in training their employees. You inquire whether the Company's charges for the videotape recordings are subject to the sales tax.

General Laws Chapter 64H Section 2 imposes the sales tax on sales at retail of tangible personal property.

Section 1(14) of Chapter 64H provides that any amount paid for any services that are a part of a sale must be included in determining the sales price of property on which the sales tax is based, and that no deduction may be taken on account of the cost of materials used, labor or service cost, or other expenses.

Section 1(13)(c) of Chapter 64H excludes from the definition of "sale at retail" personal service transactions which involve no sale or which involve sales as inconsequential elements for which no separate charges are made. The Massachusetts Supreme Judicial Court held in Houghton Mifflin Co. v. State Tax Commission that the sale of reproduction proofs to a book publisher was a retail sale and not a personal service transaction exempt from sales tax under Chapter 64H, Section 1(13). The Court declared that

"[t]he cost of labor is often a major cost of producing an object for sale. That circumstance is not the significant factor, however, in determining whether sale is an inconsequential element of a personal service transaction... The test is the object of the transaction. If the buyer's fundamental object is to obtain the item of personal property transferred to it, the sale of that property cannot reasonably be considered 'inconsequential' and the transaction cannot reasonably be considered one for personal service." (373 Mass. 772, 775 (1977).)

Chapter 64H, Section 6(m) sets forth an exemption from the sales tax for sales of motion picture films, but the exemption is limited to sales "for commercial exhibition."

Based on the foregoing, it is ruled that the Company's charges for videotape recordings are subject to the sales tax.

Very truly yours,

/s/L. Joyce Hampers

L. Joyce Hampers
Commissioner of Revenue

LJH:JXD:mf

LR 82-115